Union Budget: Key Details & Importance
As we come closer to February 1, the chatter around the expectations over Union Budget increases. From young college students looking to start their careers and small business owners to leading economists and industrialists, almost every Indian citizen keeps a tab on the Budget announcement. Let us discuss what is Union Budget and its importance for the economy.
What is Union Budget?
Union Budget is a statement of the government’s estimated revenues and expenditures for a particular financial year. Since India is the Union of States, the country’s Budget is known as the Union Budget. Article 112 of the Indian Constitution also refers Union Budget as the Annual Financial Statement.
Furthermore, as per Article 112, the government must present the Budget before Parliament ahead of the start of a financial year. Given this, the Budget is presented on the first day of February month, ensuring reasonable time for discussion, and voting for the Budget.
The Union Budget comprises two parts – Capital Budget and Revenue Budget
- Capital Budget – It includes capital receipts and expenditures of the government. The capital receipts are the loans from the public, the Reserve Bank of India (RBI), foreign governments, etc. Capital payments are the expenditures on the development and maintenance of long-term assets and infrastructure facilities, machinery, education, healthcare, etc.
- Revenue Budget – Revenue Budget is an account of all the revenue receipts and revenue expenditures of the government. The revenue collected by the government in the form of taxes and various fees on services is included in the revenue receipts. Whereas, the expenditure incurred on subsidies, providing various services, interest payments and the day-to-day functioning of various government departments are included in revenue expenditure. When the revenue expenditure of the government is higher than the revenue receipts, it is a revenue deficit.
If the total expenditure of the government exceeds its total revenue during a financial year, it incurs a fiscal deficit.
Why is the Union Budget important?
Following are the reasons why a Union Budget is necessary:
- Systematic allocation of resources
The government efficiently allocates the available resources to various departments for the development of healthcare, education and infrastructure projects in the country. The Budget ensures that the resources are allocated optimally to maximize profit and foster public welfare.
- Rationalise the tax structure
Taxation affects both citizens and the government. Hence, an efficient taxation structure is needed that benefits both parties. In the Budget, the government announces the latest changes made to Direct and Indirect Tax norms depending upon the prevailing economic situation.
- Create employment opportunities
Unemployment and poverty continue to remain a massive roadblock in people’s progress and the country’s economic development. The Union Budget focuses on creating employment opportunities in the country with various new schemes and allocating more funds to the existing government schemes.
Finance Minister Nirmala Sitharaman is set to present the Union Budget for FY 2023-2024 on February 1. This will be the current government’s last full budget before the nation goes into general elections in 2024. Hence, it is highly anticipated that the finance minister has a tough task to strike a balance between the common man’s expectations and economic growth.
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